This study uses behavioral insights and a computer-based survey to determine the most acceptable exit strategy for eliminating the fuel subsidy scheme in Indonesia. During the survey, subjects were given several pair-wise choices and were asked to choose which strategy they deemed to be more acceptable. The results of the survey show that a combination of gradual elimination and a scheme that reallocates money for vaccinations for children and investment in mass rapid transportation (MRT) were considered to be most desirable. Immediate elimination combined with a reallocation scheme that earmarked money made its presence felt in subjects’ preferences. Unsurprisingly, immediate elimination and a broad reallocation scheme was the least favored choice among survey respondents. Cross-group comparison in sessions 1 and 2 suggested consistency of choice amongst groups regarding the two most and least desirable choices. The results suggest that subjects also prefer immediate elimination but only if it is paired with an earmarked (not a broad) reallocation scheme.
Eliminating the Fuel Subsidy in Indonesia: A Behavioral Approach